Everyone is pinpointing China, the Fed, Europe and other international turmoil for the market crash over the past week. And justifiably so. China has roughly tripled its debt burden over the last six years to more than $20 trillion. Investors are starting to suspect a worst case financial scenario that Beijing is starting to resemble the U.S. – circa 2008. And Janet Yellen is a modern day Hamlet at the helm of the Federal Reserve with her daily wavering: to raise or not to raise (interest rates).
But another overlooked factor behind the fear mania is the narrative that our major political candidates are laying out to American voters in recent weeks.
Hillary Clinton is seen as the market-rational Democrat – someone who at least can tolerate business – but the email scandal has sent her into a political free fall – and she’s now anything but a lay up to win the Democratic nomination. To save herself from rivals on her left, she has endorsed a rise in the capital gains tax to 43%- which would be the highest in the advanced world and three times the rate when George W. Bush left office.
Want to tank the stock market? Tell investors that the rate of tax on their investments is going to rise by one-third or more.
We need our political leaders to start promoting growth policies, not Depression policies.
Then you’ve got Hillary’s primary rival on the left, Vermont Senator Bernie Sanders endorsing tax rates of 50 or 60 or even 70 percent to pay for a government that gives away for free cradle to grave benefits to the citizens. This sounds like the 1970s when stocks lost more than half their value in real terms. Sanders is attracting crowds in the tens of thousands.
Vice President Joe Biden is now reportedly ready to throw his hat in the ring promising four more years of Obamanomics. Is it a wonder that investors are feeling sea sick?
But most worrisome of all is the Donald Trump phenomenon on the right. Trump’s theme is an appealing one and right one the mark: “Make American Great Again.” But he wants to resurrect trade walls around the United States via tariffs on imported goods from China and Mexico who are “eating our lunch.”
The good news is that Mr. Trump seemed to walk back from this policy when he said on "Face the Nation" this past weekend that we want “people of talent to come into the country. we want people who go to our colleges…You know, when you go to Harvard, you go to Wharton, you go to Stanford, and you’re immediately thrown out when you finish getting a degree."
The last president who was a trade protectionist was Herbert Hoover, and his tariff policy, Smoot-Hawley, wrecked the world economy for a decade known as the Great Depression.
The Heritage Foundation reports that about one-third of U.S. growth in recent years is due to exports. Shutting down global trade is a sure way to turn a market downturn into a massive and prolonged sell off that vaporizes wealth.
And speaking of a leadership vacuum, where is President Obama during this market meltdown?
Last week as the market started to collapse, his EPA announced new regulations to reduce U.S. natural gas production, which comes on the heels of his pronouncement earlier this month of new draconian rules on coal production that could decapitate this industry as well. So in one month he’s assaulted the two industries that provide 80 percent of our power. His chief economist announced we can’t get to 4 percent growth.
We need our political leaders to start promoting growth policies, not Depression policies. Reform the corporate tax system by lowering rates. Repeal all or most of ObamaCare. End senseless regulations that are paralyzing our employers. Adopt a pro-Ameica energy policy that uses ALL our abundant resources. Celebrate business. Don’t bash it.
Where is the leader who will do that? Where is the next Reagan or Thatcher or JFK or Winston Churchill? Where is he or she?
Stephen Moore is a Fox News contributor. Moore is the Distinguished Visiting Fellow, Project for Economic Growth, at The Heritage Foundation. He is also an economic consultant with Freedom Works. Prior to joining Heritage he wrote on the economy and public policy for The Wall Street Journal.